A Chinese Central Bank Investment Strategy

Recent moves by the Chinese could have ripple effects on some key American companies, particularly when it comes to a long-term investment strategy.

Banks in China may be forced to change their investment strategies if the central bank continues to operate with its current lack of transparency or predictability. Late last week, the central bank refused to provide liquidity to the money markets, placing liquidity constraints on some market participants and driving short-term rates to nearly 30%. Anyone pursuing an investment strategy based on Chinese construction may need to rethink plans if the banks tighten lending practices.

In the video below, Fool.com contributor Doug Ehrman discusses recent activity by the Chinese central bank and how to craft an investment strategy around its moves. Companies like Alcoa(NYSE:AA) and Freeport-McMoRan(NYSE:FCX) could be negatively affected, but gold and the SPDR Gold Trust(NYSEMKT:GLD), as well as gold miners – including Barrick(NYSE:ABX) and Goldcorp(NYSE:GG) could benefit. Crafting an investment strategy on the news will require careful attention to what comes next for monetary policy in China.